Eric Posner on the (il)legality of the AIG takeover by the Fed

All glee aside (born out of my being directly affected by this mess), over at the Volokh Conspiracy (a libertarian blog presided over by various luminaries of the legal profession), Eric Posner (Judge Posner's son and an eminent lawyer himself) has the following to say (edited):

The AIG Deal.
True, the Fed statute says that loans can be issued with conditions. As a commenter asks, what loan doesn’t have conditions? But the Fed statute does not say that the Fed can purchase businesses, and it seems reasonable to interpret the statute to forbid the Fed to purchase businesses. So here’s the question, is the AIG deal a purchase or a loan? I suspect the deal is a loan in form but a purchase in substance. Unfortunately, the details are not available, but the press accounts suggest that the Fed is receiving AIG equity (more precisely, the option to obtain equity) as collateral for the loan but that it’s going to exercise the option more or less automatically. Here’s an analogy. Suppose that I lend you $100 and we agree that all of the equity in your business will be collateral for the loan. The contract provides, however, that you must pay me interest of a gazillion dollars, due one second after closing, and that if you fail, that counts as a default, whereupon the collateral is mine. The parties use the loan form but substantively a sale occurs. A court would almost certainly interpret the transaction as a sale, not a loan, if tax or other legal consequences turned on the distinction. If the AIG loan is like this, then it’s illegal. So: why aren’t our rule-of-law friends yowling?

Update: more on this here.

Videira plays the first half in reserve match at Killie

From the Hamilton Academical official website:

Accies Reserves drew 1-1 at Rugby Park against Kilmarnock last night, Tuesday. Stuart Taylor had fired Accies into the lead on the hour mark while Donovan Simmonds equalised on 90 minutes for the home side on a very wet night. Accies lined up - Murdoch, Casement, Gibson, Evans, Taylor, McQueen, Lyle, Videira (Carrigan 45), Thomas (Kirkpatrick 74), Ettien (Grady 82), Corcoran. Manager Billy Reid was pleased with the display and the good football we played.

Ownership Society

With the government's acquisition of AIG, this Administration has effectively positioned itself to the left of China. Unfortunately, I can't confirm whether the Chinese government owns the China Life Insurance Company (the second biggest insurer in the world after AIG), a stake in which I can buy on the market. But, importantly, Yao Ming is their spokesman. Which entrepreneurial athlete is going to be AIG's spokesman, huh? (Manchester United is now sponsored by the United States, hehe.)

(Thanks to Unprofessional Foul via The Original Winger)

McCain and Palin dive in the box

That's all I have to say about all the bullshit that's coming out of their campaign. I hope this most recent episode, involving lipstick and pigs, is a clever ploy by Obama to show how petty and inane the Republican candidates are. While Obama gives a speech addressing the importantce of making the electorate less retarded (better education of course!), McCain demands apologies (for using the same terms he himself used to describe Hillary's health policy). I think Barack may be too busy to be apologetic, even if he did "misspeak." By the way, while Barack was graduating in the top 10% at Harvard Law School, Palin was busy switching colleges, to the tune of six colleges in six years (twice at U. Idaho). The anti-intellectualism of the (national) Republican party is appalling. This cultural populism of theirs (which effectively says being ignorant is somehow an American value) threatens to destroy this country.

David Paterson may not be right that criticism of community organizing has racial connotations. But, "small town values" from Palin's speech is a not so oblique reference to "white values." American cities and American towns share American values which encompass hard work, faith, etc. Therefore, there is no principled way to distinguish between small town values and city values other than on the basis of race. (Are city inhabitants lazy? Many are plenty religious.) Black inhabitants of small towns will overwhelmingly vote Obama and Palin knows that nothing she could say would change that, so she wasn't speaking for them.

P.S. Apologies for using a soccer analogy when discussing a "hockey mom," but soccer is what's on my mind these days.